Bloomberg News

European Banks Able to Meet Capital Targets, Bank Watchdog Says

July 10, 2012

European banks reached a target of raising 114.7 billion euros ($141 billion) in fresh capital by the end of June, according to a European Union document.

The “capital shortfall” has “been largely raised from private sources and where necessary public backstops were activated,” according to a memorandum prepared for EU finance ministers for a Brussels meeting today that was obtained by Bloomberg News.

The European Banking Authority told lenders to meet a core Tier-1 capital ratio of 9 percent by the end of June, and hold additional reserves, called a sovereign buffer, against the debt of weaker euro-area countries, based upon the market price of the bonds. The measures were part of a response to the sharp fall in the value of securities issued by euro-area governments.

“The EBA exercise was a necessary step on the road to repair banks’ balance sheets and strengthen their capital base,” the document said. “The recommendation will remain in force until the normalization of risks.”

A preliminary report will be released tomorrow, according to the document, with more detailed results to be published in September.

Franca Rosa Congiu, a spokeswoman for the EBA in London, didn’t immediately return a telephone voice-mail message seeking comment.

To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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